skip tocontent

ombudsman news

issue 110

June/July 2013

wear and tear in motor insurance

As we noted in our recent annual review, we have continued to see an increasing number of complaints involving motor insurance. During the last financial year complaints were up 7% on the previous year - following a 26% rise the year before that.

We continue to see problems arising from disagreements about the cause of the damage to a vehicle - particularly in those cases that involve accidents. We often see consumers and insurers disagreeing about whether all the damage had been caused by the accident - in which case it is the usually the insurer's responsibility to sort it out - or whether some of the damage had been caused by "wear and tear". When we look into complaints like this, we need to examine the evidence to decide what was most likely to have caused the damage.

As the following case studies show, sometimes problems arise during the settlement of claims - once the insurer has accepted that a claim is covered under the consumer's policy. We sometimes see problems where damage has been caused by wear and tear over a number of years, but the consumer has only had the car for a short time - and they were expecting their vehicle to be worth more than their insurer is prepared to offer.

In these cases, we look at the facts carefully to establish what exactly the insurer is liable for under the policy. We sometimes need to explain to the consumer that their insurer is aiming to put them - as far as possible - in the position they would now be in if the accident hadn't happened.
The following case studies illustrate some of these problems, and how we approach them in different circumstances.

issue 110 index of case studies

  • 110/8 - consumer complains that insurer will not repair her car because damage was already there
  • 110/9 - consumer complains that her car was damaged while being repaired - but her insurer insisted there were existing problems
  • 110/10 - consumer complains that finance company will not cover the full cost of repairs to his car
  • 110/11 - consumer complains that finance company will not cover the full cost of repairs to his car
  • 110/12 - consumer complains that he was sold a car that had a poor service history

110/8
consumer complains that insurer will not repair her car because damage was already there

Mrs M's car was parked at the side of the road when another car drove into the side of it. The other driver and their insurer accepted full liability for the damage straight away - and Mrs M claimed against her own insurance.

After the car had been inspected, Mrs M's insurer told her that it was not willing to pay to have her car repaired. The insurer said that her car was badly corroded in certain places - and that for the damage caused by the accident to be repaired, the corrosion damage would need to be repaired at the same time. The insurer said this would cost £3,000.

The insurer said that its responsibility was to pay for repairing the damage caused by the accident - and not the damage caused by the corrosion. It said that if all the repair work was carried out, the car would be returned to Mrs M in a better condition than before the accident.

Instead of repairing the car, the insurer offered Mrs M a cash settlement of £500 - to cover the cost of repairing the damage caused by the accident. But Mrs M was not happy with this offer. From her point of view, she had done nothing wrong and was now being asked to pay a lot of money for her car to be repaired.

When the insurer refused to change its offer, Mrs M made a complaint. She said that the corrosion had not caused her any problems before the accident.

And she pointed out that it only needed to be repaired because of the accident - so the insurer should pay for all the repairs.

When her insurer rejected her complaint, Mrs M asked us to look into it.

complaint not upheld
We looked carefully at what Mrs M's insurer had offered - and checked whether it was in line with the details of the her policy. The policy document said that the insurer could settle a claim by repairing the damage, or replacing the vehicle, or offering a cash settlement.

The corrosion damage had been caused by wear and tear - and not by the accident. In this case, we thought it was reasonable for the insurer to offer Mrs M a cash settlement for the damage caused by the accident, rather than having all the repairs carried out. After all, it would not have been able to repair the damage caused by the accident without the corrosion damage being repaired as well.

In these circumstances, we concluded that the insurer's offer of £500 was fair - and we did not uphold the case.

110/9
consumer complains that her car was damaged while being repaired - but her insurer insisted there were existing problems

Ms H was driving home from her partner's house when she ran into the back of another car. She phoned her insurer straight away, and the insurer arranged for her car to be assessed at a garage.

The engineer who examined the car found that the accident had caused some damage - and Ms H's insurer arranged for her car to be repaired.

The car was repaired and delivered back to Ms H. But when she started the engine, it seemed to be making far more noise than usual.

Ms H phoned her insurer to tell them about the noise. A customer services adviser explained that all the damage caused by the collision had been repaired. But he also told her that the engineer's initial assessment had identified "other issues" with the car - that had probably been there before the accident had happened.

Ms H was surprised to hear about these other problems. She said that she hadn't noticed anything before the accident - and asked what she was supposed to do now that the engine was making such a noise.

The insurer's adviser arranged for a different engineer to check Ms H's car. When he inspected the car, he reported that none of the issues that had recently come to light had been caused by the accident.

The insurer told Ms H that it was not liable for these problems - and that they had probably been caused by "the oil being over-filled before the accident".

Ms H complained to her insurer. She said that she hadn't put too much oil in her car - and that she was not convinced that her car had any existing problems. She said that the problems must have been caused by the accident or the subsequent repairs.

In response to Ms H's complaint, the insurer arranged for the car to be inspected again. The engineer who carried out the inspection noted that the engine was making a lot of noise, but confirmed that it was probably caused by a pre-existing problem - and had not been caused by the accident or the repairs.

Ms H was not happy with this response. She took the car to her local car workshop, who found that there was a loose bolt in the oil pump. A mechanic fixed the problem - but Ms H had to pay for the work. Although her car was now fine, she decided to bring her complaint against the insurer to us.

complaint upheld
Ms H showed us the invoice from the car workshop. The invoice showed that the oil pump failure had been caused by a loose bolt.

The insurer had said all along that the problem had been caused by the oil being over-filled before the accident but it did not provide any persuasive evidence of this. However, the invoice from the car workshop showed that this was not the issue - and that the problem was a loose bolt in the oil pump.

We decided that, on balance, the problem with the car's oil pump was likely to have been caused by the accident or during the initial repairs.

In these circumstances, we told the insurer to refund Ms H the cost of fixing the loose bolt. We also told it to pay her £150 to compensate her for the time and trouble she had been put to.

110/10
consumer complains that insurer will only pay a reduced cash settlement - because of existing damage to his car

Mr C bought a used car from a private owner. Four months later he was involved in an accident on the way to work. He phoned his insurer - and an adviser arranged for the car to be inspected at a local garage.

The engineer who carried out the inspection said that the cost of the actual repairs would be far greater than the value of the car. His report also showed that there was some damage to the car that had not been caused by the accident. This included some scratches on the doors and a large dent in the front bumper.

On the back of the report, the insurer decided to settle Mr C's claim by a cash settlement. It wrote to Mr C to tell him that her car had been valued at £3,000 - but that it had deducted £350 for "pre-existing damage". The insurer pointed out that this damage had affected the value of his car.

Mr C was not happy with this settlement. He had only had the car for four months - and he thought the insurer should pay him the car's full value.

He complained to the insurer - but when it refused to reconsider its position, he asked us to look into his complaint.

complaint resolved
We asked the insurer for a full explanation of how it had arrived at its valuation of Mr C's car. We were satisfied that it was a fair reflection of the car's market value.

As part of our consideration of the engineer's report, we also took into account the fact that the engineer was appropriately qualified to carry out this sort of work - and we could see no reason to doubt his findings.

Having satisfied ourselves that the insurer had followed its own procedures correctly, we got in touch with Mr C. We explained to him that it didn't make any difference how long he had actually owned the car - or whether the damage had occurred before or after he had bought it. We pointed out that the insurer was aiming to put him - as far as possible - in the position he would now be in if the accident hadn't happened.

In cases like this, where the repairs would cost more than a car is worth, insurers usually pay a cash settlement. We explained to Mr C that an insurer will usually come up with a figure by assessing the value of the car before the accident happened. In Mr C's case, the scratches on the doors and the dent in the bumper would have affected the value of his car before the accident - and so the insurer had reflected that in its settlement figure.

Once we had explained this to Mr C, he was happy to let the matter go.

110/11
consumer complains that finance company will not cover the full cost of repairs to his car

Mr W bought a used premium-brand car from his local dealership. The car had 90,000 miles on the clock and came with a one-month warranty. Mr W signed up to a finance agreement to pay for it.

Just before the warranty ended, Mr W took the car back to the dealership for a maintenance check - and a mechanic said that everything was fine.

A month later, Mr W phoned the dealership again. He said there was a problem with the car's clutch. The salesman at the dealership told him to get in touch with his finance company - who was responsible for the car from now on under Mr W's finance arrangements.

Mr W phoned the finance company. He explained that he had been having trouble with the car's clutch since the day he bought it. The adviser asked Mr W whether he had raised this with anyone at the dealership. Mr W said that he hadn't. The adviser suggested that Mr W was probably having problems because he wasn't used to the type of clutch in his new car.

Mr W wasn't convinced. He thought there must be something wrong with the clutch. So he took his car back to the dealership and asked for them to look into it. A mechanic examined the car and confirmed that the clutch was faulty.

By this time the car's warranty had ended - and the dealership was no longer responsible for it. It said it would cover the cost of the labour as a gesture of good will, but it wouldn't cover the cost of the parts - and that Mr W should get in touch with his finance company about that.

Mr W did not think that he should have to pay for the parts, and he complained to the finance company.

But the finance company said there was no evidence that the clutch had been faulty when the car was sold - and that the maintenance check a month later hadn't found any problems either. The finance company also pointed out that the car had a lot of miles on the clock. It said that Mr W had covered a lot of miles in a short space of time, and that might have contributed to the problem. The company concluded that in these circumstances, the problems with the clutch had probably been caused by wear and tear.

Mr W wasn't happy with the finance company's response. He hadn't expected to have so many problems with a premium-brand car - and he decided to ask us to investigate.

complaint not upheld
We asked the finance company to send us the paperwork relevant to this case. There was no record of any problem with the clutch - either when the car was sold, or at the check that had taken place a month later. From this, we concluded it was likely that the car hadn't had a faulty clutch when Mr W had bought it.

A car's clutch is particularly susceptible to wear and tear - especially when the car has high mileage. In this case, the car already had 90,000 miles on the clock before Mr W had bought it. We could see from the dealership's records that Mr W had driven a further 5,000 miles during the short time he had owned it.

We decided that this amount of use - on top of the existing high mileage - had probably caused the damage to the clutch.

In these circumstances, we concluded that the finance company should not be held responsible for covering the cost of the repairs.

110/12
consumer complains that he was sold a car that had a poor service history

Mr T had recently retired. He thought he would probably be doing less driving now that he wasn't working, so he decided to sell his car and buy a smaller one. He paid for the car by taking out a hire purchase agreement with a finance company.

For just over a year, everything was fine with the car. But when the engine started making strange noises, Mr T took the car to his local garage straight away. The mechanic explained that the problems were being caused by traces of metal in the engine oil - and that the entire engine would now need to be replaced.

When Mr T asked how metal could have ended up in the oil, the mechanic said it was probably because the car hadn't been serviced properly for a number of years.

To find out when the car had last been serviced, Mr T looked for the log book that would show its service history. But he couldn't find it, so he phoned the dealership to ask whether they still had it. The salesman at the dealership told Mr T that the car didn't have a log book - so there hadn't been one when he had bought it. The salesman said that if Mr T was having problems, he should take it up with the finance company.

So Mr T phoned the finance company to complain about what had happened. He faxed them a letter from the mechanic who had inspected the car - and asked them to cover the cost of the repairs. But the finance company said it was not willing to pay.

The reason it gave was that there was no evidence to suggest the car had been faulty when Mr T had bought it. It said it was too late for him to report the problem anyway - because he had bought the car over a year ago. And it pointed out that the car had been fine for a year, so any problems had clearly arisen since Mr T had bought the car.

Mr T wrote back to the finance company. He pointed out that he had only driven just over 2,000 miles in the car during the year - and that it was very unlikely he was responsible for the problems with the engine.

When the finance company refused to reconsider its position, Mr T brought his complaint to us.

complaint upheld
We asked the finance company to send us the information they had about this case. From the paperwork that related to the dealership, we noted that the car's "pre-delivery check" showed the wrong registration number - and appeared to relate to an entirely different car. They had no paperwork about Mr T's car - and so there was no evidence to show that his car had been through proper checks or serviced properly before it was sold to him.

The mechanic who had inspected Mr T's car had said in his letter that the engine trouble was probably caused by a lack of maintenance over a number of years. We noted that Mr T was clearly a low-mileage driver, and he had only owned the car for just over a year.

In these circumstances, we concluded that the damage was likely to have been caused before Mr T had bought the car. So we told the finance company to pay for the engine to be repaired.

image: ombudsman news issue 110

ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.